The Value of Successful Transition Plans for Leaders

By Anne Pertus

According to the Corporate Leadership Council described in a recent Human Capital Institute and DBM white paper “Fifty percent of newly hired executives quit or are fired within the first three years.” Similarly, the Center for Creative Leadership states that “Forty to 50 percent of new CEOs fail in the first 18 months.” Crawford explains, “The honeymoon is short. Senior executives have very little time to gain credibility, build trust and confidence and positively impact the organization.”

The losses can be significant in terms of turnover.  Michael Watkins states in his book, “The First 90 Days” that the cost of turnover is “14 times the base salary for those earning under $100K.” Another study listed in “Topgrading” by Bradford Smart asserts that for those earning between $100K and $250K, the cost of turnover is 40 times base salary.

Despite these statistics, not all companies are investing in the ‘’onboarding’’ process with their executives. There is still the notion that the executive will learn quickly on his orher own and dazzle within a few months. Despite everyone’s  best intentions, leaders are dismissed for not hitting their targets or they simply seek better challenges elsewhere. Unfortunately it’s not always the individual’s fault; have they been hired into the best ‘’situation’’, for their strengths and experience? Have they been developed in the business, particular situation and culture of the organisation?

In the “The First 90 Days” by Michael Watkins shows the breakeven point of the value of a leader into a new position.

A person in a new role will consume value in the first 3 months. After that point they will start adding value. However, the company typically starts seeing a return on their investment or net contribution only at the 6.2 months point.
So, how does an organisation speed this process up?
Michael Watkins and other experts agree that organisations need to build individualized learning plans for the transition to be successful; a formal plan that holds the leader and the company accountable for the transition.

So what is a growing small or medium sized business to do when there are no ‘’on-boarding experts internally? Furthermore, most companies have not developed their current leaders in the ’’on-boarding process.

The best advise you could get is to start at the beginning by ‘’laying the foundation’’.

For the on-boarding program to work and actually be executed, the process has to make sense to the reality of the business. Experts start by looking and defining the strategic vision of the company. The process is facilitated by  answering the following questions: Where are you now? Where are you going? Who are your current talent? Will this talent base take you to where you want to go?

It is important that the new leader’s  needs are understood and a successful transition plan is created and followed closely by all of the stakeholders. Everyone has accountability for the successful transition.

Once everyone understands the crucial component of accountability, the focus is getting the new leader transitioned and impacting the business much quicker than before thus saving time and precious resources. The effect on the bottom line is impressive over time. Remember the statistics quoted at the beginning of this article? 40 times the base salary really ads up so a successful  transition plan  is  obviously a priority worth mastering.

If you would like to attend our next Executive Brief on this topic, please join our invitation list. Please note that the events are intended for managers and leaders of companies with 50 to 1000 employees.

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